Saturday, May 17, 2008
The government issued a superseding indictment in the prosecution of Barry Bonds following the court's grant of a motion to dismiss filed by defense counsel. (see here) In essence, the defense argued that there were too many different instances within each count, making it difficult to refute each charge. Bonds was given what he asked for - in a new indictment that charged more counts - but provided specificity to each count.
Basically it puts the defense and prosecution back to square one with little difference in the actual conduct alleged. One benefit to the defense now, is that prosecutors will not be able to claim a victory by proving one statement in a count that involves four different alleged acts. One downside may be if it goes to trial and the jury decides upon a compromise verdict, there are now more counts to work with.
One can almost hear the prosecutor's opening statement in this case -- if there is a trial down the road. It might go something like this -- "this is a case about lying." As a matter of fact, maybe the prosecutor can borrow the script from the Martha Stewart trial.
Superseding Indictment - Download bonds_new_indictment_508.pdf
Thursday, May 15, 2008
"The principal founder and former Chief Executive Officer of PurchasePro.com, Inc. . . . , a now-defunct internet company that specialized in business-to-business commerce ('B2B')" was found guilty after a bench trial of "conspiracy to commit securities fraud, securities fraud and witness tampering." The court noted that "PurchasePro established and promoted virtual 'marketplaces' in which buyers and sellers of goods could interact with one another." The opinion describes the relationship of this company with AOL.
In a press release issued by the US Attorney for the Eastern District of Virginia it states:
"[the defendant] originally faced trial on the securities fraud and witness tampering charges in a jury trial that began in October 2006 before Judge Kelley. [The defendant’s] first trial ended after Judge Kelley granted a motion from [the defendant]’s defense attorney to withdraw from the case and a mistrial was declared. The remaining defendants were subsequently acquitted. In the retrial, which began in October 2007, an obstruction of justice charge was consolidated with the original securities fraud charges. In addition to the guilty verdict on the original charges, Judge Kelley also found [the defendant] guilty of obstructing a federal proceeding as a result of his conduct during his original trial."
The U.S. Attorney did not issue a press release when the initial defendants were acquitted and there is only one sentence of the acquittal in this press release. (see here)
The opinion - Download johnson_final_verdict_and_opinion_w_esig.pdf
Houston Chronicle - Court Upholds Punishment for Ex-Reliant Trader
A DOJ Press Release reports that
"Former private investigator Anthony Pellicano and two associates were found guilty today of federal racketeering charges for participating in a criminal enterprise in which Pellicano paid tens of thousands of dollars to police officers in exchange for confidential law enforcement information on numerous individuals who were being investigated by Pellicano.
"A federal jury today also found that Pellicano and others were involved in the installation of wiretaps on the phones of numerous individuals whom Pellicano had been hired to investigate."
(esp)(w/ thanks to Bill Olis)
Looking at the deferred prosecution agreement signed in the Willbros matter, two things are interesting. First is the treatment of attorney-client privileged materials and the second is the document related to the appointment of an internal monitor.
With respect to attorney client privileged material, the deferred prosecution agreement allows the government to obtain the items and penalizes the company for non-compliance. The company can give notice to the DOJ if they wish to withhold access to "information, documents, records, facilities and/or employees based upon an assertion of a valid claim of attorney-client privilege or application of the attorney work-product doctrine." But "[i]n the event that WGI and WII withhold access to the information, documents, records, facilities and/or employees of WGI and WII, the Department may consider this fact in determining whether WGI and WII have fully cooperated with the Department." Is this a determination that DOJ should have control over, and should they be allowed to obtain this attorney-client privilege material as part of a deferred prosecution agreement? And is it proper to allow one party to a contract the ability to determine if there is compliance with a term within the contract?
The Deferred Prosecution Agreement - Download willbros_deferred_agreement.pdf
The monitor gets selected by Willbros. It is subject to approval by the DOJ. This may avoid situations of a DOJ appointment of a friend or former political boss. But is this going to the other extreme by allowing the company the right to chose the person who will provide oversight? Wouldn't a better approach be to have an impartial member of the judiciary making these decisions?
The Monitor Attachment - Download attachment_d_independent_corporate_monitor.pdf
(esp) (w/ thanks to Librarian Whitney Curtis)
Wednesday, May 14, 2008
Although there has been talk previously, it is now official that Willbros will receive a deferred prosecution agreement as a resolution of its matters with the DOJ. The DOJ's press release states that this company, a "construction, engineering and other services in the oil and gas industry, and Willbros International Inc. (Willbros International), the wholly owned subsidiary through which it conducts international operations, have agreed to pay a $22 million criminal penalty in connection with corrupt payments to Nigerian and Ecuadoran government officials in violation of the Foreign Corrupt Practices Act (FCPA)." The government states that "[t]he six-count criminal information charges Willbros with one count of conspiring to make bribe payments to Nigerian and Ecuadoran officials, two counts of violating the FCPA in connection with the authorization of specific corrupt payments to officials in those countries and three counts of violating the FCPA by falsifying books and records relating to corrupt payments and a tax fraud scheme."
Why a deferred prosecution agreement here? The DOJ explains that
"[i]n recognition of Willbros' thorough review of the improper payments, the companies’ exemplary cooperation, the companies’ implementation of enhanced compliance policies and procedures, and the companies’ engagement of an independent corporate monitor, the Department has agreed to defer prosecution of these companies for three years. If Willbros Group and Willbros International abide by the terms of the agreement, the Department will dismiss the criminal information when the term of the agreement ends."
Willbros now has a foreign corrupt practices act policy, and this policy was issued in October 2007.
Tuesday, May 13, 2008
The Washington Legal Foundation issued a 143 page report titled Special Report: Federal Erosion of Business Civil Liberties. (see below for a copy of the report) It begins with an introduction by the Honorable Dick Thornburgh who writes that "The Washington Legal Foundation's SPECIAL REPORT: FEDERAL EROSION OF BUSINESS CIVIL LIBERTIES provides the legal community with an excellent summary, analysis, and critique of the key legal, judicial, and regulatory developments in the growing trend to criminalize normal business activities." The Report has seven chapters, followed by an Appendix, reflecting the following topics -
- Chapter One: Mens Rea, Public Welfare Offenses, and the Responsible Corporate Officer Doctrine
- Chapter Two: Environmental Protection Agency Criminal Enforcement Policies
- Chapter Three: Department of Justice Criminal Prosecution Policies
- Chapter Four: Parallel Civil and Criminal Prosecutions
- Chapter Five: Attorney-Client and Work Product Privileges
- Chapter Six: Deferred Prosecution and Non-Prosecution Agreements
- Chapter Seven: U.S. Sentencing Guidelines
This is clearly a weekend read as it appears to capture the key issues that have been problematic to businesses operating in this country.
The Report - Download wlf_timeline.pdf (Recommendation to open - save it to your system and then it should open properly)
If you have trouble opening this link, or to obtain additional hard copies of the report and the companion timeline fold-out chart, contact Paul Kamenar at 202-588-0302 or firstname.lastname@example.org. He informed me that they plan to update the report from time to time, so he welcomes stories of abusive criminal prosecution that have not been well publicized.
White Collar Crime prosecutions continue to be extremely low, despite the fact that they have increased this past month. According to the Syracuse TRAC reporting system, there has been a 28.4 percent increase in the number of white collar crime prosecutions in the month of January. This number, however, is a -17.3 percent change from 5 years ago (including the magistrate court) and a -19.4 (excluding the magistrate court). It is disheartening to see that white collar crime is not being prosecuted at the levels that it was being handled five years ago, although AG Mukasey can credit himself with increasing these prosecutions from the last couple of administrations. Not surprising, however, is the fact that the number one charge being used by prosecutors is mail fraud - 18 U.S.C. 1341.
This reporting, however, has many deficiencies as DOJ's categories for white collar crime do not match the definition provided by many and also do not include many offenses that clearly are considered white collar crime by the individual U.S. Attorney offices (see Is DOJ Cooking the Books in its Reporting of White Collar Crime?) Interestingly, aggressive overcharging by the government, may be hurting their statistics. There is no category under white collar crime for recording the use of money laundering and RICO charges that are used by the government in so many of the white collar cases.
(esp) (w/ disclosure that she is a B.S. graduate of Syracuse U.- home of the Trac Reports).
In the case of United States v. Williams, the Eleventh Circuit Court of Appeals affirmed the convictions of two individuals who had received a 96 month and 60 month sentence for a violation of 18 U.S.C. s 1832, the theft of trade secret statute. The defendants in this case were accused of trying to sell trade secrets of Coca-Cola to Pepsi. Pepsi notified Coca-Cola of the attempt to sell them trade secrets and Coca-Cola then brought in the FBI, who used an undercover agent to secure the evidence obtained in this case
The court rejected the appellants arguments of a claimed Sixth Amendment violation in limiting cross-examination, limiting the closing argument, and using the judge's recent open heart surgery as an example when defining reasonable doubt. The court also rejected a sentencing argument. Williams, who received the 96 month sentence was given an above guidelines range, in sharp contrast to a sentence given to an individual who plead guilty and received a 24 month sentence. The 11th Circuit held that giving enormous weight to one factor - in this case the seriousness of the offense - does not mean the sentence is unreasonable. The court explicitly states in discussing the 60 month sentence given to one of the individuals here that because this individual "did not provide any assistance to the government, there was no 'unwarranted' disparity between his sentence" and the sentence of 24 months given to a cooperating party.
Although the court's opinion does not discuss this point, allowing for a significant sentence reduction for cooperation raises some concerns. For one, it can put the individual with little information to provide the government at an enormous disadvantage. It also places the individual who is last to the talk with authorities at a loss, as all the information may have already been provided to the government. The credibility of those providing cooperation becomes more questionable when the rewards for giving the information reaches levels that offer a significant advantage to the cooperator. Perhaps the biggest concern is that providing such an enormous benefit to cooperators places those who decide to use their constitutional right to trial by jury, at a disadvantage.
See AJC - here
Addendum - Professor Doug Berman's Sentencing Law & Policy Blog here.
Monday, May 12, 2008
The Ninth Circuit Court of Appeals in United States v. Chapman affirmed the dismissal of the indictment in a case where a grand jury had indicted defendants in a "complex securities trading scheme" and failed to disclose over 650 pages of documents in discovery to the defense. This is likely a case that the government may have wished that they had not appealed. The court's conclusion says it all:
"The district court did not abuse its discretion in dismissing the indictment. The government egregiously failed to meet its constitutional obligations under Brady and Giglio. It failed to even make inquiry as to conviction records, plea bargains, and other discoverable materials concerning key witnesses until after trial began. It repeatedly misrepresented to the district court that all such documents had been disclosed prior to trial. The government did not admit to the court that it failed to disclose Brady/Giglio material until after many of the key witnesses had testified and been released. Even then, it failed to turn over some 650 documents until the day the district court declared a mistrial and submitted those documents to the court only after the indictment had been dismissed. This is prosecutorial misconduct in its highest form; conduct in flagrant disregard of the United States Constitution; and conduct which should be deterred by the strongest sanction available. Under these facts, the district court did not abuse its discretion in characterizing these actions as flagrant prosecutorial misconduct justifying dismissal. Nor did it abuse its discretion in determining that a retrial—the only lesser remedy ever proposed by the government—would substantially prejudice the defendants."
In a press release New York Attorney General Andrew Cuomo announced that he had reached a settlement with "a western New York law firm and a Capital Region attorney ending improper employment arrangements with school districts and various Boards of Cooperative Educational Services (“BOCES”)."
The release states:
“In recent months my office has uncovered long-term and systemic fraud on the public pension and benefits systems which have potentially wasted millions of taxpayer dollars,” said Attorney General Cuomo. “Lawyers representing school districts and BOCES across the state were given public benefits they were not entitled to. Some lawyers have received illegal perks for years and were improperly put on district payrolls. My office will continue to follow this investigation wherever it leads, and we will put an end to this abuse.”
It also states:
"Cuomo’s ongoing investigation of pension fraud includes reviews of employment practices at all school districts across the state and all 37 BOCES, and has expanded to include more than 4,000 local governments and special districts across New York state. The investigation has already revealed that many lawyers had remained on school districts’ or BOCES’ payrolls for such extended periods of time, or were included on the payrolls of so many school districts or BOCES simultaneously, that they accumulated substantial credits in the New York State Employees’ Retirement System."
Guest Blogger - Gordon Kirsch (rising 3L Stetson University College of Law)
Session V: Legal Ethics: A View from the Bench - A Summary by Gordon Kirsch
In the last session of the White Collar Crime Institute held at Stetson University College of Law, hypotheticals were discussed by several federal judges (Chief Judge Patricia C. Fawsett, Judges Richard A. Lazarra, Anne C. Conway, Mary S. Scriven, Thomas B. McCoun III).
The first problem questioned whether attorneys can stipulate to the application of a guideline, knowing that it might not be applicable in their case? As each of the judges weighed in, the answer became clear -- full candor toward the tribunal is required and a judge should not accept pleas based on facts which do not exist.
The second problem asked whether the defense attorney can enhance facts as part of a plea agreement to avoid a minimum mandatory sentence. The conclusion here was that a judge has an obligation to explore the full facts and decide for him or herself whether they support the plea. Again, full candor is needed and it should be emphasized that judges are not party to plea agreements and can refuse to enforce them.
Problem three was a short problem asking whether a prosecutor can suggest the defense agree to a smaller amount of damages as part of a securities fraud plea agreement? Every judge agreed that full candor was necessary and that this should not be allowed.
The final problem involved a large conspiracy and issues related to entering into a joint defense agreement with the alleged co-conspirators. Discussed were issues such as attorney-client privilege. Among the attorneys in the audience, many expressed their views that often the joint defense agreements are not worth the paper they are written on, though in some circumstances they may be necessary.
DOJ Press Release - Former Alaska State Representative Victor Kohring Sentenced On Public Corruption Charges (sentenced to 22 months in prison) ("part of an ongoing investigation into public corruption in the State of Alaska")
ABA Law Journal News - Ex-Prosecutor Acquitted at Trial Loses Bid for Attorney Fees; Paul Egan, Detroit News - Convertino Request is Denied - He Sought Attorney Fees for Case that Resulted in Acquittal on Obstruction of Justice Charges
NYTimes - Corruption Case Taints Rising Political Star (discussing Rezko trial and presidential candidate Obama & Governor Blagojevich)
Sunday, May 11, 2008
60 Minutes aired a special on Chiquita Banana, The Price of Bananas, in which they reported on the issues that faced this company in trying to operate in Colombia and their self-reporting to the DOJ of violations in making illegal payments to a paramilitary group in Colombia. Their self-reporting resulted in the company facing a significant penalty - a $ 25 million dollar fine and 5 years probation. (see Sentencing Memo here) The company also was the subject of a prosecution and plea, and not the recipient of a deferred prosecution agreement. To a large extent, this recent report mirrored and expounded upon the work of former Wall Street Journal reporter Laurie Cohen, who back in August 2007 discussed the dilemma faced by Chiquita in trying to protect employees and also trying to comply with the law. (see Laure Cohen, Chiquita Under the Gun, WSJ)
Some interesting points:
- 60 Minutes reported that "the Colombian government is now talking about extraditing Chiquita executives to Colombia." The extraterritorial application of U.S. laws by the DOJ may be coming back to haunt them as other countries may now think they have the right to come into the U.S. and proceed against corporate executives here. The cost of a company operating abroad may be significantly increased if CEOs, or others within the U.S., start facing indictment in other countries.
- The 60 Minute Special includes names of other companies that are alleged to be in violation, although the source of the allegations is in prison and charged with offenses in Colombia. One has to wonder if the DOJ has investigated these other companies, or if the only one who gets prosecuted is the one who comes forward and does the right thing by turning themselves into the government. Based on this 60 Minute Special one might have a certain skepticism about whether the government is taking a proactive role in this investigation. On the other hand, the effect of the WSJ article, and now 60 Minutes, may stimulate further DOJ activity. Of course, there is also the possibility that they did investigate and find no merit to the allegations that other companies were involved in illegal payments.
- The DOJ took a positive approach in not indicting individuals after Chiquita turned themselves into authorities. Perhaps this will send a message to corporate executives at other companies that they need to work with the DOJ to avoid individual liability. This could place the company against the individual when an individual may be trying to protect themselves from personal liability while the company is saying that proof is not present, so the company should not self-report.
- Why is it that Chiquita received a plea with conviction, while other companies get a deferred prosecution agreement? Is this but another example of the enormous discretion of the DOJ?
Addendum - ABA Jrl Law News Now - Colombia Extradites 14 Warlords to Face U.S. Drug Charges